Bacon: Burnt, but still in business

In a year of falling prices, dwindling demand and a scathing report from the World Health Organisation, is there anything business can do to save its bacon? Oscar Rousseau reports.

Last year was a bad year for bacon. In fact, 2015 was a bad year for pork in general. European pig meat prices fell to its lowest level in a decade as production outstripped demand and Russia said ‘no thanks’ to EU pork, slamming an embargo down on food imports. The move caused a series of difficulties for Europe’s pork industry. But the UK’s £1.3bn bacon market has been hit with a number of domestic factors that have caused sales to decline year-on-year.

The bacon market suffered a sharp drop in both its value and volume, falling by 6% and 2% respectively when compared to last year. This is according to 52-week data provided by Kantar, which tracked the sales of bacon between January 2015 and 3 January 2016. The data reveals a triumvirate of factors have forced bacon into a year-on-year decline. The dominant cause in bacon’s poor performance is a falling retail value, which has dropped by as much as 12%. But shopper baskets are now smaller than they used to be and consumers are simply not buying bacon as much as they used to do, say Kantar.

The fall of bacon is nothing new as sales have been on a downward trajectory since mid-2013, but this decline accelerated in 2015. Now, one could attribute this to the result of falling prices, or consumers buying bacon less frequently. But what about the World Health Organisation (WHO) report that linked the consumption of bacon to cancer? Kantar analyst Helena King says the effect of the report is “hard to quantify”. However, the report has “helped to increase the pressures on the market, which was already declining” and we should “expect a report of this magnitude to have an effect [on bacon],” says King.

Bacon sales were already falling before the WHO report was published in October 2015. But its release caused a wave of scaremongering stories to appear in the mainstream press, heaping pressure on the bacon industry. In the report, the WHO said it considers bacon, sausages and ham to be among the most carcinogenic substances along with cigarettes, alcohol and arsenic. The UN health body claimed that eating 50g of processed meat a day increases the chance of developing colorectal cancer by 18%. The media duly pounced on this statistic. “Bacon and hot dogs cause CANCER,” said the Express. “Bacon, ham and sausages as big a cancer threat as smoking,” reported the Telegraph, and the Daily Mail ran with this: “Just two rashers of bacon a day raises your risk of cancer”. These newspapers are collectively read by millions of people every day, but have these alarmist headlines actually had a quantifiable effect on the already-falling sales of bacon?

AHDB Pork’s head of marketing Kirsty Walker certainly doesn’t think so, saying: “In a recent YouGov survey, only 2% of respondents said they were heavily influenced by the media when it comes to what they should and shouldn’t eat.” Walker also says that the 2016 YouGov survey reveals that over “72% of respondents agreed that they lived by the motto ‘everything in moderation’ and 43% thought the WHO announcement was another example of the media hyping up a story.” Based on the YouGov survey of 4,304 respondents, it seems the WHO report may not have had a significant impact on the decision of consumers to buy or not to buy bacon. However, Walker says the meat industry needs to look at the medium and long-term data before an empirical conclusion on the WHO report’s impact on bacon sales is reached. In any case, AHDB says it is monitoring the situation closely and has put measures in place to investigate the short and long-term impact, if any, of the WHO report.

Cooked connoisseurs

Despite the accelerating decline of raw bacon sales, cooked, sandwich-ready bacon continues to has enjoyed market growth, according to a report from M&C Allegra. Cooked bacon has been able to capitalise on the booming foodservice sector, with cooked bacon being for a range of ready-made sandwiches, salads and pastas. In sandwich sector alone, the industry goes through 6,300 tonnes of cooked bacon every year, according to Jim Winship, director of the International Sandwich Association.

One company leading the charge for ready-to-eat bacon is Dawn Farms, one of Europe’s leading producers of cooked and fermented ready-to-eat meats. “Cooked bacon lends itself ideally to the growing demand for food on the go, as it provides operators with so many choices of combinations to pair with it,” said Dawn Farms UK sales director, Ian Ritchie. “With greater footfall continuing in the convenience sector, sandwich operators are successfully innovating around the less structured eating habits of consumers, and cooked bacon is a key ingredient in that mix. We see more experimenting with ingredients that add crunch, texture and taste, from full slice crispy bacon, pepperoni chunks and pigs in blankets to chunkier vegetables and fresh herbs, “ he says. Ritchie also explains that innovation in the cooked bacon sector is crucial to attracting customers with a propensity for new flavours. “We’ve developed a number of exciting flavoured bacons, tying into consumer enthusiasm for more adventurous tastes, for example: espresso bacon, jalapeno bacon, black pepper bacon and an extremely tasty salted caramel bacon.”

Low steaks

The different types of bacon commonly bought on the market are chops, joints, rashers and steaks. Rashers account for 72% of the bacon market and because rasher sales fell in 2015, this has had a noticeable impact on the market’s overall decline. Rashers are by far the most popular type of bacon on the market and have driven decline in the sector with a falling retail price. Sales of bacon rashers generated £908m last year, a 5% fall when compared to figures from 2014. Bacon joints retain the second largest share of the market with 18.9% and have also seen a similar level of decline. Kantar says people who used to frequently buy bacon joints have moved away from buying larger items, purchasing meat that is more convenient to store in the fridge. Sales of bacon joints generated £238m in 2015, a year-on-year decline of 5%, according to Kantar. Bacon chops retain the smallest share of the market with just 0.3%, and sales of £4,372 reflect its small stake in the market. However, it is the only category of bacon to see sales grow, storming to a year-on-year rise of 27%. The strong performance of bacon chops is the result of consumers choosing chops over rashers more frequently, say Kantar. The fastest decline in the sector has been the fall of bacon steaks, with a year-on-year drop of 12%. Bacon steaks have a market share of 8.9% and sales in 2015 reached £112m. But it is struggling to claw back consumers who are turning their back on it in favour of other types of meat. Kantar’s Helena King says that shoppers may also be moving away from bacon steaks because of a “general decline in promotional activity”.

Despite all the doom and gloom about the fall of bacon, a modicum of good news for the sector is this: bacon’s market penetration – essentially the total number of individual people buying bacon - has actually increased. The increase in the number of individual buyers has not offset the overall market decline, but the anomaly proves bacon remains an in-demand product. In fact, bacon is bought by around 88% of British consumers, according to Kantar. And there is strong evidence to suggest that the British public is not, in the words of AHDB’s Kirsty Walker, “falling out of love with bacon”.

“We know bacon is seen by consumers as a product that offers good value. We know, following the WHO announcement, the hard discounters showed positive sales data for bacon, with spend up 10% and volume up 17% year-on-year. Over Christmas, we saw a huge increase in the consumption of ready-made pigs in blankets showing a 13% value increase. In foodservice, bacon is an area in growth driven by increases in eating out for breakfast. There were around 20,000 (3%) more servings of bacon over the year,” says Walker.

Fall of the big four

Kantar says supermarket chains are moving away from volume-based promotions in many markets; this allows consumers to make savings even when they’re buying one product. It is prevalent across a range of food sectors and this strategy has hurt the sales of bacon. The big four supermarkets - Tesco, Asda, Sainsbury’s and Morrisons - have a combined 62.5% share of the bacon market and all experienced a decline in sales. These supermarkets are shifting their sales strategy away from volume-based promotions, like the three packs of meat for £10 deal, and this move has caused sales of bacon to slide. Sainsbury’s has seen the biggest drop out of the big four supermarkets with sales down 10% when compared to 2014. With a 13.9% share of the bacon market, it has the third-largest stake out of any UK retailer - only Tesco (22.5%) and Asda (14.3%) have a bigger share of the market.Sainsbury’s decision to move away from the Y for X deals on bacon and other fresh meat products is one on the reasons that has played a part in the decline of bacon, according to Kantar. Out of the other three big four supermarkets, Tesco recorded the second-largest fall with an 8% drop in bacon sales. Asda and Morrisons were both hit with a 5% downturn in year-on-year sales.

High-end grocery retailer Marks & Spencer saw the biggest decline in bacon out of all UK retailers, with sales falling by 22%. This, however, did not have a huge impact on the overall depreciation as the retailer accounts for just 3.2% of all bacon sales.

Other well-known grocery retailers hit with a downturn in bacon sales are the Co-Operative, which recorded a drop of 12%. Waitrose experienced a 3% fall in sales, with a 1% dip endured by frozen food specialists Iceland.

The independent UK butchery sector collectively has a 3.6% share of the bacon market and sales fell by 4%. But despite all the reports of falls, downturns, decline and demise, there remain two supermarkets that have bucked the bacon trend of falling value: discounters Aldi and Lidl. These grocery juggernauts are the only retailers to enjoy the rare prospect of growth in the bacon sector, despite strongly overtrading in the market in the past. Out of the two, Aldi recorded by far the biggest growth with bacon sales rising by 20%. Lidl, for comparison, experienced a comparatively marginal growth of 2%. Bacon sales at Aldi and Lidl accounted for 12% of all sales last year. Because the discounters have sold bacon at cheaper prices than the other retailers, this has has pushed the overall value of bacon down, according to Kantar.